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The unfortunate case of income-inequality in India

Anuj Rakheja 
on 19 September 2018

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As of 2018, India is the fastest growing economy in the world, a statistic I am sure all Indians would be proud of. But here’s another statistic, according to the Global Wealth Report 2016, India is the second most unequal economy in the world. While India is home to a total of 101 billionaires, it also houses nearly 25 crore people who earn less than 1 USD per day. The richest 1% own nearly 60% of the wealth in the country, while the richest 10% own nearly 81% of the wealth.

These figures present an appalling truth, something we as a country should be ashamed of, especially because as our economy grows, this income inequality instead of narrowing, is being widened. I believe following to be some of the root causes of this statistic:

  1. Lack of proper education to the poor: The governments in India, be it BJP or Congress, have failed over the decades to provide proper good quality education to the poor. As a result, the poor stay poor and do menial jobs for survival.
  2. Overpopulation: A country has limited resources and can sustain only a limited number of people. India has lost its battle against overpopulation a long time ago as a number that should have been stopped at about 50 crores is now approaching 150 crores. A variety of factors like lack of education and awareness, lack of political will and religion (assuming “bache to bhagwan ki den hain”) can be blamed for this.
  3. A meagre minimum wage: The minimum wage in the USA is approx. Rs. 600. per hour or Rs. 5,000 per day or more than Rs. 1 lakh per month. Whereas, in India, the minimum wages are approx. Rs. 15,000 in Delhi and a fraction of that in the rural areas of the country. Even this minimum wage guideline is rarely followed as we see people making a lot less than this every day.
  4. Crony Capitalism: While I myself am a Capitalist and encourage capitalism as it is the only way to develop at a fast pace, but Crony capitalism is a curse that has plagued India for too long. The super-rich Corporates get subsidies and tax holidays from the Government and they pay meagre wages to the labor whom they employ, thereby becoming richer themselves and making the poor struggle for a two-time meal. This is one factor we need to ponder over, if India needs to be prosperous. Look at the billionaires in countries like USA and UK, a vast majority of those billionaires were self-made and used innovation to build huge Companies like Apple, Facebook, Microsoft, Tesla, etc., whereas Indian billionaires largely comprised of people who became rich through Government contracts, the contracts that were possibly given to them through huge kickbacks and nepotism. (I am not saying all billionaires were made through crony capitalism, but a large number definitely were.)

I am sure there would be a lot many causes to this income inequality, I would like the readers to comment more reasons that they think are the cause of this income inequality in India.

I believe that the article would be incomplete without talking about possible solutions that might narrow down this economic gap between the rich and the poor. Here are some solutions off the top of my mind. Please feel free to add more solutions.

  1. Free good quality school-level education to all: While free school level education is available to the poor, we all know the pathetic quality of most Government schools. Either, the teachers are absent or are unqualified in most of the schools and children are left at the mercy of God. I am sure we are willing to pay the now cancelled Education cess if that means proper education for the poor.
  2. A family planning law: We have seen how China has successfully implemented a family planning law to limit their population. However, our Governments have failed to do so because of vote-bank politics. A law that limits the number of children is the need of the hour.
  3. A minimum wage that is not a joke: It is practically impossible for any family to live a decent life at Rs. 15,000 per month. We need a minimum wage of at least Rs. 25,000 per month and a strict implementation of the same.
  4. No more Crony Capitalism: This is the toughest part of all. It is nearly impossible to remove crony capitalism in a corruption-ridden society like India. But, I strongly believe that the day this ends, we as a country will truly start progressing.

The author is a May 2015 qualified Chartered Accountant and CFA Level 3 passed, presently leading the Business Advisory Section of Stratvisors India.


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